Posted by Ward-CA- on December 16, 2002 at 02:32:21:
In Reply to: getting started in pre-foreclosures posted by dc-indiana on December 15, 2002 at 22:59:56:
: first of all, my greatest thanks to any who read and reply. i have been buying and selling properties for the past two years and would like to get into pre-foreclosures. the problem i've had is when i buy a foreclosure the house is trashed, and the bank takes it's time approving my offer, as you all know time is money in real estate. thus the reason for getting into preforeclosures. i am hoping to find the people before they trash the home. that way i can buy the home on land contract, first paying off what they owe in deliquent payments then giving them an appropriate sum to release the remaining equity via land contract or some other way you may suggest. is it even legal for them to sell to me on land contract? i hope to sign people up on 1 or 2 year contracts with a ballon payment due at the end. of course i hope to flip the property and sell within 6 months and go on to the next deal. if anyone can help me with their advise i will appreciate it. thanks.
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DC,
For sure, I would drop the land contract approach.
I would simply sit down with the owners and figure out their net equity in the property. I’d do that by figuring out the current fair market value of their property and then deducting all liens of record and back property taxes and then all the expenses of rehabbing and reselling.
Then I’d do a 50/50 deal with them and divide that net equity figure in half. In exchange for a deed to the property I’d give them their half and complete the deal as follows:
1. $2,000 upon you receiving the recordable deed. Record the deed the same day at your county recorder’s office.
2. $3,000 more upon their vacating the premises—in a “broom clean” condition.
3. Give them their remaining balance in the form of a straight note and mortgage secured by the property. Said note and mortgage to be payable in full upon your refinance or resale of the property or in one year from their recording of the mortgage, whichever event happens first. Set the interest rate for their promissory note at 1 percent more than the current home loan interest rate average.
Contact the customer service department of your local title company and get the forms (deed, mortgage or trust deed, and straight note) you need from them. That way you will be sure your forms are in compliance with your state’s requirements.
Also ask the title company for a copy of the latest, most current recorded deed to the property. That will tell you who all the owners are and give you the legal description you need to put on the deed you receive from them and also the mortgage you’re giving them.
You can get a fillable form for the net equity worksheet at the link below.
Hope this helps.
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